In common with most other major auto manufacturers Volvo has invested heavily in driverless vehicle technology in recent years.
Under the deal, Otto's co-founder Anthony Levandowski will head Uber's self-driving work in personal transportation, delivery and trucking at centres in San Francisco, Palo Alto and Pittsburgh reporting to Uber CEO and co-founder Travis Kalanick.
In April the companies were founding members of a coalition pushing a unified legal code for self-driving cars in the United States, along with Uber's rival Lyft, automaker Ford, and Google.
Otto was only founded in January but much of its staff comes from more established firms including Apple, Google, Tesla Motors [NSDQ:TSLA] and Cruise Automation. These are tragedies that self-driving technology can help solve, but we can't do this alone.
The initial test phase will take place in Pittsburgh later in August where Uber users will be able to hail one of these self-driving cars.
For thepast two years Uber has made a strong push into developing self-driving vehicle technology, which is what it brings to the venture with veteran manufacturer Volvo.
Uber self-driving cars to go public, offers rides in Pittsburgh: To ride in a self-driving auto will soon be available to Uber customers in Pittsburgh. Both companies will use the same base vehicles for the next step in their autonomous driving strategies.
According to USA media, Anthony Levandowski, who has been involved with Google's self-driving cars project in the past, will lead Uber's self-driving efforts and report directly to Travis Kalanick, Uber CEO and co-founder. "It is unconscionable for them to offer rides to passengers at this stage".
Self-driving vehicles have made headlines recently for malfunctioning. Uber will only make a few cars available to start - with the eventual goal of having 100 in Pittsburgh and possibly elsewhere in the coming months - and they will only go limited distances within the city. "Developing an autonomous vehicle is basically essential for us because if there is not, we're not going to have any business".
Autonomous Volvo XC90s with human drivers from Uber could be on the road operating in the ride-hailing service network by the end of the year, according to a report from Automotive News.
"One million people die in auto accidents every year", he said.